Learn Russian: Мой друг живёт рядом.

When рядом is used by itself, it acts as an adverb meaning 'nearby' or 'close by'. You only need to add с and use the Instrumental case if you are specifying what exactly someone is next to, like in the phrase рядом с парком (next to the park).

Could I use 'близко' instead of 'рядом' in this sentence?

Yes, Мой друг живёт близко is grammatically correct and also means your friend lives close. However, рядом often implies a closer physical proximity, like living right next door or on the same street, whereas близко just means a short distance away.

I learned that 'рядом' comes from the noun 'ряд' (row). How does that connect to meaning 'nearby'?

You are exactly right! рядом is literally the Instrumental case of the noun ряд (row). Historically, standing рядом meant standing shoulder-to-shoulder 'in a row' with someone. Over time, it evolved into a fixed adverb simply meaning 'nearby' or 'next to'.